Sebi changes rules for alternative investment funds

According to the regulations, Category III AIFs may not invest more than 10% of investable funds in an investment company, either directly or by investing in shares of other AIFs

According to the regulations, Category III AIFs may not invest more than 10% of investable funds in an investment company, either directly or by investing in shares of other AIFs

The capital market regulator Sebi has changed the regulations on investment aspects of certain categories of alternative investment funds (AIFs).

Under the rules, Category III AIFs are not allowed to invest more than 10% of investable funds in an investee company, directly or through investments in shares of other AIFs, Sebi said in a statement on Wednesday.

Various types of funds such as hedge funds, PIPE funds, etc. are registered as category III AIFs.

In addition, the large value funds for accredited investors of category III AIFs can invest up to 20% of investable funds in an investment company directly or by investing in shares of other AIFs.

This is subject to the proviso that Category III AIFs may calculate the investment limit of 10% of either the investable funds or the net asset value of the fund for investments in listed shares of an investment company, while large funds for accredited investors of Category III AIFs may calculate the investment limit of 20% Calculate a percentage of either the investable funds or the system’s net asset value.

The new norms, called Sebi’s AIF Regulations, 2022, came into force on Wednesday.

In November 2021, the regulator allowed category III AIFs, including large value funds for accredited investors of category III AIFs, to calculate the concentration norm based on the fund’s net asset value (NAV) for investing in listed shares of an investee company.

AIFs, in market jargon, refer to a privately pooled investment vehicle that collects funds from Indian or foreign investors to invest those funds in India.

Broadly speaking, the AIF rules apply to venture capital funds, private equity funds, SME funds and hedge funds, among others.

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